Li & Fung Ltd., the biggest supplier of clothes and toys to Wal-Mart Stores Inc. and Target Corp., is working on “plenty” of possible deals in the US, saying the world’s biggest economy is showing signs of improving.

Li & Fung on Tuesday announced plans to raise HK$2.7 billion (US$348 million) selling new shares to fund purchases. Rockowitz is signing outsourcing deals and buying rivals, last month completing an agreement to supply Liz Claiborne Inc., whose brands include Kate Spade and Juicy Couture. Li & Fung made 62 percent of its HK$110.7 billion sales last year in the US.

“Retailers are struggling financially and looking for cost- effective options including turning their sourcing functions over to Li & Fung, as in the case of Liz Claiborne and Talbots Inc.,” Renee Tai, senior vice president of research at CIMB-GK Securities (HK) Ltd., said in a note to clients today. She upgraded the stock to “neutral” from “underperform.”

Shares rise

Li & Fung rose 1.4 percent to close at HK$22.35, after dropping 8 percent Tuesday. The advance boosted the stock’s gain this year to 68 percent compared with a 17 percent increase for the benchmark Hang Seng Index.

The company said it will sell shares at a price of HK$22.55 each, 6 percent lower than the May 4 closing price.

Li & Fung, which also supplies Inditex SA’s Zara chain and Gap Inc., is eyeing “acquisitions and some major outsourcing deals” as prices of assets have fallen globally, Rockowitz said. The company also has plans for acquisitions in Asia, he added.

The agreement to acquire Liz Claiborne’s sourcing business may boost sales by $1 billion, the company has said.

Talks to become the primary supplier for Talbots, the US chain specializing in clothing for women aged 35 and older, may be completed within two months, according to the CEO.

“We’re going to gain a lot of market share in the current weak time,” Rockowitz added.

Discounters and “mid-tier” retailers are showing the most improvement, while “very high-end department stores” are still struggling, Rockowitz said, declining to identify any retailing companies. He said the company supplies “all the major retailers” in the US.

Source: Bloomberg